1
Partnership, Agency and Trusts
September 14, 2018
Articles 1800-1814
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-59956 October 31, 1984
ISABELO MORAN, JR., petitioner,  that by virtue of the partnership agreement entered into by the
vs.
THE HON. COURT OF APPEALS and MARIANO E. PECSON, respondents.
GUTIERREZ, JR., J.:ñé+.£ªwph!1
This is a petition for review on certiorari of the decision of the respondent Court
of Appeals which ordered petitioner Isabelo Moran, Jr. to pay damages to
respondent Mariano E, Pecson.
As found by the respondent Court of Appeals, the undisputed facts indicate
that: têñ.£îhqwâ£
xxx xxx xxx
... on February 22, 1971 Pecson and Moran entered into an
agreement whereby both would contribute P15,000 each for
the purpose of printing 95,000 posters (featuring the delegates
to the 1971 Constitutional Convention), with Moran actually
supervising the work; that Pecson would receive a commission
of P l,000 a month starting on April 15, 1971 up to December
15, 1971; that on December 15, 1971, a liquidation of the
accounts in the distribution and printing of the 95,000 posters
would be made, that Pecson gave Moran P10,000 for which
the latter issued a receipt; that only a few posters were printed;
that on or about May 28, 1971, Moran executed in favor of
Pecson a promissory note in the amount of P20,000 payable in
two equal installments (P10,000 payable on or before June 15,
1971 and P10,000 payable on or before June 30, 1971), the
whole sum becoming due upon default in the payment of the
first installment on the date due, complete with the costs of
collection.
Private respondent Pecson filed with the Court of First Instance of Manila an
action for the recovery of a sum of money and alleged in his complaint three (3)
causes of action, namely: (1) on the alleged partnership agreement, the return of
his contribution of P10,000.00, payment of his share in the profits that the
partnership would have earned, and, payment of unpaid commission; (2) on the
alleged promissory note, payment of the sum of P20,000.00; and, (3) moral and
exemplary damages and attorney's fees.
After the trial, the Court of First Instance held that: têñ.£îhqwâ£
From the evidence presented it is clear in the mind of the court
parties-plaintiff and defendant the plaintiff did contribute
P10,000.00, and another sum of P7,000.00 for the Voice of the
Veteran or Delegate Magazine. Of the expected 95,000 copies
of the posters, the defendant was able to print 2,000 copies
only authorized of which, however, were sold at P5.00 each.
Nothing more was done after this and it can be said that the
venture did not really get off the ground. On the other hand, the
plaintiff failed to give his full contribution of P15,000.00. Thus,
each party is entitled to rescind the contract which right is
implied in reciprocal obligations under Article 1385 of the Civil
Code whereunder 'rescission creates the obligation to return
the things which were the object of the contract ...
WHEREFORE, the court hereby renders judgment ordering
defendant Isabelo C. Moran, Jr. to return to plaintiff Mariano E.
Pecson the sum of P17,000.00, with interest at the legal rate
from the filing of the complaint on June 19, 1972, and the costs
of the suit.
For insufficiency of evidence, the counterclaim is hereby
dismissed.
From this decision, both parties appealed to the respondent Court of Appeals.
The latter likewise rendered a decision against the petitioner. The dispositive
portion of the decision reads: têñ.£îhqwâ£
PREMISES CONSIDERED, the decision appealed from is
hereby SET ASIDE, and a new one is hereby rendered,
ordering defendant-appellant Isabelo C. Moran, Jr. to pay
plaintiff- appellant Mariano E. Pecson:
2
(a) Forty-seven thousand five hundred (P47,500) (the amount
that could have accrued to Pecson under their agreement);
(b) Eight thousand (P8,000), (the commission for eight
months);
(c) Seven thousand (P7,000) (as a return of Pecson's
investment for the Veteran's Project);
(d) Legal interest on (a), (b) and (c) from the date the complaint
was filed (up to the time payment is made)
The petitioner contends that the respondent Court of Appeals decided questions
of substance in a way not in accord with law and with Supreme Court decisions
when it committed the following errors:
I
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
PETITIONER ISABELO C. MORAN, JR. LIABLE TO RESPONDENT MARIANO
E. PECSON IN THE SUM OF P47,500 AS THE SUPPOSED EXPECTED
PROFITS DUE HIM.
II
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
PETITIONER ISABELO C. MORAN, JR. LIABLE TO RESPONDENT MARIANO
E. PECSON IN THE SUM OF P8,000, AS SUPPOSED COMMISSION IN THE
PARTNERSHIP ARISING OUT OF PECSON'S INVESTMENT.
III
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
PETITIONER ISABELO C. MORAN, JR. LIABLE TO RESPONDENT MARIANO
E. PECSON IN THE SUM OF P7,000 AS A SUPPOSED RETURN OF
INVESTMENT IN A MAGAZINE VENTURE.
IV
ASSUMING WITHOUT ADMITTING THAT PETITIONER IS AT ALL LIABLE
FOR ANY AMOUNT, THE HONORABLE COURT OF APPEALS DID NOT EVEN
OFFSET PAYMENTS ADMITTEDLY RECEIVED BY PECSON FROM MORAN.
V Code of the Philippines, we allowed a total of P200,000.00 compensatory
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT
GRANTING THE PETITIONER'S COMPULSORY COUNTERCLAIM FOR
DAMAGES.
The first question raised in this petition refers to the award of P47,500.00 as the
private respondent's share in the unrealized profits of the partnership. The
petitioner contends that the award is highly speculative. The petitioner maintains
that the respondent court did not take into account the great risks involved in the
business undertaking.
We agree with the petitioner that the award of speculative damages has no basis
in fact and law.
There is no dispute over the nature of the agreement between the petitioner and
the private respondent. It is a contract of partnership. The latter in his complaint
alleged that he was induced by the petitioner to enter into a partnership with him
under the following terms and conditions: têñ.£îhqwâ£
1. That the partnership will print colored posters of the
delegates to the Constitutional Convention;
2. That they will invest the amount of Fifteen Thousand Pesos
(P15,000.00) each;
3. That they will print Ninety Five Thousand (95,000) copies of
the said posters;
4. That plaintiff will receive a commission of One Thousand
Pesos (P1,000.00) a month starting April 15, 1971 up to
December 15, 1971;
5. That upon the termination of the partnership on December
15, 1971, a liquidation of the account pertaining to the
distribution and printing of the said 95,000 posters shall be
made.
The petitioner on the other hand admitted in his answer the existence of the
partnership.
The rule is, when a partner who has undertaken to contribute a sum of money
fails to do so, he becomes a debtor of the partnership for whatever he may have
promised to contribute (Art. 1786, Civil Code) and for interests and damages
from the time he should have complied with his obligation (Art. 1788, Civil Code).
Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200 of the Civil
damages in favor of the appellee because the appellant therein was remiss in his
3
obligations as a partner and as prime contractor of the construction projects in
question. This case was decided on a particular set of facts. We awarded
compensatory damages in the  Uy case because there was a finding that the
constructing business is a profitable one and that the UP construction company
derived some profits from its contractors in the construction of roads and bridges
despite its deficient capital." Besides, there was evidence to show that the
partnership made some profits during the periods from July 2, 1956 to December
31, 1957 and from January 1, 1958 up to September 30, 1959. The profits on two
government contracts worth P2,327,335.76 were not speculative. In the instant
case, there is no evidence whatsoever that the partnership between the
petitioner and the private respondent would have been a profitable venture. In
fact, it was a failure doomed from the start. There is therefore no basis for the
award of speculative damages in favor of the private respondent.
Furthermore, in the Uy case, only Puzon failed to give his full contribution while
Uy  contributed much more than what was expected of him. In this case,
however, there was mutual breach. Private respondent failed to give his entire
contribution in the amount of P15,000.00. He contributed only P10,000.00. The
petitioner likewise failed to give any of the amount expected of him. He further
failed to comply with the agreement to print 95,000 copies of the posters.
Instead, he printed only 2,000 copies.
Article 1797 of the Civil Code provides: têñ.£îhqwâ£
The losses and profits shall be distributed in conformity with
the agreement. If only the share of each partner in the profits
has been agreed upon, the share of each in the losses shall be
in the same proportion.
Being a contract of partnership, each partner must share in the profits and losses
of the venture. That is the essence of a partnership. And even with an assurance
made by one of the partners that they would earn a huge amount of profits, in the
absence of fraud, the other partner cannot claim a right to recover the highly
speculative profits. It is a rare business venture guaranteed to give 100% profits.
In this case, on an investment of P15,000.00, the respondent was supposed to
earn a guaranteed P1,000.00 a month for eight months and around P142,500.00
on 95,000 posters costing P2.00 each but 2,000 of which were sold at P5.00
each. The fantastic nature of expected profits is obvious. We have to take
various factors into account. The failure of the Commission on Elections to
proclaim all the 320 candidates of the Constitutional Convention on time was a
major factor. The petitioner undesirable his best business judgment and felt that
it would be a losing venture to go on with the printing of the agreed 95,000 copies
of the posters. Hidden risks in any business venture have to be considered.
It does not follow however that the private respondent is not entitled to recover
any amount from the petitioner. The records show that the private respondent
gave P10,000.00 to the petitioner. The latter used this amount for the printing of
2,000 posters at a cost of P2.00 per poster or a total printing cost of P4,000.00.
The records further show that the 2,000 copies were sold at P5.00 each. The
gross income therefore was P10,000.00. Deducting the printing costs of
P4,000.00 from the gross income of P10,000.00 and with no evidence on the
cost of distribution, the net profits amount to only P6,000.00. This net profit of
P6,000.00 should be divided between the petitioner and the private respondent.
And since only P4,000.00 was undesirable by the petitioner in printing the 2,000
copies, the remaining P6,000.00 should therefore be returned to the private
respondent.
Relative to the second alleged error, the petitioner submits that the award of
P8,000.00 as Pecson's supposed commission has no justifiable basis in law.
Again, we agree with the petitioner.
The partnership agreement stipulated that the petitioner would give the private
respondent a monthly commission of Pl,000.00 from April 15, 1971 to December
15, 1971 for a total of eight (8) monthly commissions. The agreement does not
state the basis of the commission. The payment of the commission could only
have been predicated on relatively extravagant profits. The parties could not
have intended the giving of a commission inspite of loss or failure of the venture.
Since the venture was a failure, the private respondent is not entitled to the
P8,000.00 commission.
Anent the third assigned error, the petitioner maintains that the respondent Court
of Appeals erred in holding him liable to the private respondent in the sum of
P7,000.00 as a supposed return of investment in a magazine venture.
In awarding P7,000.00 to the private respondent as his supposed return of
investment in the "Voice of the Veterans" magazine venture, the respondent
court ruled that: têñ.£îhqwâ£
xxx xxx xxx
... Moran admittedly signed the promissory note of P20,000 in
favor of Pecson. Moran does not question the due execution of
said note. Must Moran therefore pay the amount of P20,000?
The evidence indicates that the P20,000 was assigned by
Moran to cover the following: têñ.£îhqwâ£
(a) P 7,000 — the amount of the PNB check given by Pecson
to Moran representing Pecson's investment in Moran's other project (the
publication and printing of the 'Voice of the Veterans');
(b) P10,000 — to cover the return of Pecson's contribution in
the project of the Posters;
4
(c) P3,000 — representing Pecson's commission for three
months (April, May, June, 1971).
Of said P20,000 Moran has to pay P7,000 (as a return of
Pecson's investment for the Veterans' project, for this project never left
the ground) ...
As a rule, the findings of facts of the Court of Appeals are final and conclusive
and cannot be reviewed on appeal to this Court (Amigo v. Teves, 96 Phil. 252),
provided they are borne out by the record or are based on substantial evidence
(Alsua-Betts v. Court of Appeals,  92 SCRA 332). However, this rule admits of
certain exceptions. Thus, in Carolina Industries Inc. v. CMS Stock Brokerage,
Inc., et al., (97 SCRA 734), we held that this Court retains the power to review
and rectify the findings of fact of the Court of Appeals when (1) the conclusion is
a finding grounded entirely on speculation, surmises and conjectures; (2) when
the inference made is manifestly mistaken absurd and impossible; (3) where
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; and (5) when the court, in making its findings, went
beyond the issues of the case and the same are contrary to the admissions of
both the appellant and the appellee.
In this case, there is misapprehension of facts. The evidence of the private
respondent himself shows that his investment in the "Voice of Veterans" project
amounted to only P3,000.00. The remaining P4,000.00 was the amount of profit
that the private respondent expected to receive.
The records show the following exhibits- têñ.£îhqwâ£
E — Xerox copy of PNB Manager's Check No. 234265 dated
March 22, 1971 in favor of defendant. Defendant admitted the
authenticity of this check and of his receipt of the proceeds
thereof (t.s.n., pp. 3-4, Nov. 29, 1972). This exhibit is being
offered for the purpose of showing plaintiff's capital investment
in the printing of the "Voice of the Veterans" for which he was
promised a fixed profit of P8,000. This investment of P6,000.00
and the promised profit of P8,000 are covered by defendant's
promissory note for P14,000 dated March 31, 1971 marked by
defendant as Exhibit 2 (t.s.n., pp. 20-21, Nov. 29, 1972), and
by plaintiff as Exhibit P. Later, defendant returned P3,000.00 of
the P6,000.00 investment thereby proportionately reducing the
promised profit to P4,000. With the balance of P3,000 (capital)
and P4,000 (promised profit), defendant signed and executed
the promissory note for P7,000 marked Exhibit 3 for the
defendant and Exhibit M for plaintiff. Of this P7,000, defendant
paid P4,000 representing full return of the capital investment
and P1,000 partial payment of the promised profit. The P3,000
balance of the promised profit was made part consideration of
the P20,000 promissory note (t.s.n., pp. 22-24, Nov. 29, 1972).
It is, therefore, being presented to show the consideration for
the P20,000 promissory note.
F — Xerox copy of PNB Manager's check dated May 29, 1971
for P7,000 in favor of defendant. The authenticity of the check
and his receipt of the proceeds thereof were admitted by the
defendant (t.s.n., pp. 3-4, Nov. 29, 1972). This P 7,000 is part
consideration, and in cash, of the P20,000 promissory note
(t.s.n., p. 25, Nov. 29, 1972), and it is being presented to show
the consideration for the P20,000 note and the existence and
validity of the obligation.
xxx xxx xxx
L-Book entitled "Voice of the Veterans" which is being offered
for the purpose of showing the subject matter of the other
partnership agreement and in which plaintiff invested the
P6,000 (Exhibit E) which, together with the promised profit of
P8,000 made up for the consideration of the P14,000
promissory note (Exhibit 2; Exhibit P). As explained in
connection with Exhibit E. the P3,000 balance of the promised
profit was later made part consideration of the P20,000
promissory note.
M-Promissory note for P7,000 dated March 30, 1971. This is
also defendant's Exhibit E. This document is being offered for
the purpose of further showing the transaction as explained in
connection with Exhibits E and L.
N-Receipt of plaintiff dated March 30, 1971 for the return of his
P3,000 out of his capital investment of P6,000 (Exh. E) in the
P14,000 promissory note (Exh. 2; P). This is also defendant's
Exhibit 4. This document is being offered in support of plaintiff's
explanation in connection with Exhibits E, L, and M to show the
transaction mentioned therein.
xxx xxx xxx
P-Promissory note for P14,000.00. This is also defendant's
Exhibit 2. It is being offered for the purpose of showing the
transaction as explained in connection with Exhibits E, L, M,
and N above.
Explaining the above-quoted exhibits, respondent Pecson testified that: têñ.
£îhqwâ£
5
Q During the pre-trial of this case, Mr. Pecson, the defendant presented a
promissory note in the amount of P14,000.00 which has been marked as
Exhibit 2. Do you know this promissory note?
A Yes, sir.
Q What is this promissory note, in connection with your transaction with the
defendant?
A This promissory note is for the printing of the "Voice of the Veterans".
Q What is this "Voice of the Veterans", Mr. Pecson?
A It is a book.têñ.£îhqwâ£
(T.S.N., p. 19, Nov. 29, 1972)
Q And what does the amount of P14,000.00 indicated in the promissory
note, Exhibit 2, represent?
A It represents the P6,000.00 cash which I gave to Mr. Moran, as evidenced
by the Philippine National Bank Manager's check and the P8,000.00 profit
assured me by Mr. Moran which I will derive from the printing of this "Voice
of the Veterans" book.
Q You said that the P6,000.00 of this P14,000.00 is covered by, a Manager's
check. I show you Exhibit E, is this the Manager's check that mentioned?
A Yes, sir.
Q What happened to this promissory note of P14,000.00 which you said
represented P6,000.00 of your investment and P8,000.00 promised profits?
A Latter, Mr. Moran returned to me P3,000.00 which represented one-half
(1/2) of the P6,000.00 capital I gave to him.
Q As a consequence of the return by Mr. Moran of one-half (1/2) of the
P6,000.00 capital you gave to him, what happened to the promised profit of
P8,000.00?
A It was reduced to one-half (1/2) which is P4,000.00.
Q Was there any document executed by Mr. Moran in connection with the
Balance of P3,000.00 of your capital investment and the P4,000.00
promised profits?
A Yes, sir, he executed a promissory note.
Q I show you a promissory note in the amount of P7,000.00 dated March 30,
1971 which for purposes of Identification I request the same to be marked as
Exhibit M. . .
Court têñ.£îhqwâ£
Mark it as Exhibit M.
Q (continuing) is this the promissory note which you said was executed by
Mr. Moran in connection with your transaction regarding the printing of the
"Voice of the Veterans"?
A Yes, sir. (T.S.N., pp. 20-22, Nov. 29, 1972).
Q What happened to this promissory note executed by Mr. Moran, Mr.
Pecson?
A Mr. Moran paid me P4,000.00 out of the P7,000.00 as shown by the
promissory note.
Q Was there a receipt issued by you covering this payment of P4,000.00 in
favor of Mr. Moran?
A Yes, sir.
(T.S.N., p. 23, Nov. 29, 1972).
Q You stated that Mr. Moran paid the amount of P4,000.00 on account of the
P7,000.00 covered by the promissory note, Exhibit M. What does this
P4,000.00 covered by Exhibit N represent?
A This P4,000.00 represents the P3,000.00 which he has returned of my
P6,000.00 capital investment and the P1,000.00 represents partial payment
of the P4,000.00 profit that was promised to me by Mr. Moran.
Q And what happened to the balance of P3,000.00 under the promissory
note, Exhibit M?
6
A The balance of P3,000.00 and the rest of the profit was applied as part of
the consideration of the promissory note of P20,000.00.
(T.S.N., pp. 23-24, Nov. 29, 1972).
The respondent court erred when it concluded that the project never left the
ground because the project did take place. Only it failed. It was the private
respondent himself who presented a copy of the book entitled "Voice of the
Veterans" in the lower court as Exhibit "L". Therefore, it would be error to state
that the project never took place and on this basis decree the return of the private
respondent's investment.
As already mentioned, there are risks in any business venture and the failure of
the undertaking cannot entirely be blamed on the managing partner alone,
specially if the latter exercised his best business judgment, which seems to be
true in this case. In view of the foregoing, there is no reason to pass upon the
fourth and fifth assignments of errors raised by the petitioner. We likewise find no
valid basis for the grant of the counterclaim.
WHEREFORE, the petition is GRANTED. The decision of the respondent Court
of Appeals (now Intermediate Appellate Court) is hereby SET ASIDE and a new
one is rendered ordering the petitioner Isabelo Moran, Jr., to pay private
respondent Mariano Pecson SIX THOUSAND (P6,000.00) PESOS representing
the amount of the private respondent's contribution to the partnership but which
remained unused; and THREE THOUSAND (P3,000.00) PESOS representing
one half (1/2) of the net profits gained by the partnership in the sale of the two
thousand (2,000) copies of the posters, with interests at the legal rate on both
amounts from the date the complaint was filed until full payment is made.
SO ORDERED.1äwphï1.ñët
Teehankee (Chairman), Melencio-Herrera, Plana and Relova, JJ., concur.
De la Fuente J., took no part.
7

Republic of the Philippines Davao City. Complainants assumed the mortgage of the
SUPREME COURT building in favor of S.S.S., which building was insured with
Manila respondent S.S.S. Accredited Group of Insurers for
P25,000.00.
FIRST DIVISION
On April 19, 1975, Azucena Palomo obtained a loan from Tai
G.R. No. L-55397 February 29, 1988 Tong Chuache Inc. in the amount of P100,000.00. To secure
the payment of the loan, a mortgage was executed over the
land and the building in favor of Tai Tong Chuache & Co.
TAI TONG CHUACHE & CO., petitioner,  (Exhibit "1" and "1-A"). On April 25, 1975, Arsenio
vs. Chua, representative of Thai Tong Chuache & Co.  insured the
THE INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY latter's interest with Travellers Multi-Indemnity Corporation for
CORPORATION, respondents. P100,000.00 (P70,000.00 for the building and P30,000.00 for
the contents thereof) (Exhibit "A-a," contents thereof) (Exhibit
"A-a").

GANCAYCO, J.: On June 11, 1975, Pedro Palomo secured a Fire Insurance

This petition for review on certiorari seeks the reversal of the decision of the
Insurance Commission in IC Case #367 1 dismissing the complaint 2 for recovery
of the alleged unpaid balance of the proceeds of the Fire Insurance Policies
issued by herein respondent insurance company in favor of petitioner-intervenor.
Policy No. F- 02500 (Exhibit "A"), covering the building for
P50,000.00 with respondent Zenith Insurance Corporation. On
July 16, 1975, another Fire Insurance Policy No. 8459 (Exhibit
"B") was procured from respondent Philippine British
Assurance Company, covering the same building for
P50,000.00 and the contents thereof for P70,000.00.

The facts of the case as found by respondent Insurance Commission are as

follows: On July 31, 1975, the building and the contents were totally
razed by fire.

Complainants acquired from a certain Rolando Gonzales a

parcel of land and a building located at San Rafael Village, Adjustment Standard Corporation submitted a report as follow

xxx xxx xxx

... Thus the apportioned share of each company is as follows:

Pol C R I P
icy o i n a
No. m s s y
. p k u s
a r
n e
y s

MI Z B P P
RO e u 5 1
8

n i 0 7
it l , ,
h d 0 6
i 0 1
n 0 0
g .
9
3

F- I      
02 n
50 s
0 u
r
a
n
c
e

  C      
o
r
p
.

F- P H 7 2
84 h o 0 4
59 il u , ,
0 . s 0 6
e 0 5
h 0 5
o .
l 3
d 1

  B      
r
it
i
s
h

  A      
s
s
c
o
.
9

C
o
.

  I F 5 3
n F 0 9
c F , ,
. 0 1
& 0 8
0 6
.
F 1
5 0

Pol C R I P
icy o i n a
No. m s s y
p k u s
a r
n e
y s

FIC S      
- S
15 S
38 A
1 c
c
r
e

  d      
it
e
d

G
r
o
u
p

  o B P P
f u 2 8
I i 5 ,
n l , 8
s d 0 0
u i 0 5
10

r n 0 .
e g 4
r 7
s

    T P P
o 1 9
t 9 0
a 5 ,
l , 2
s 0 5
0 7
0 .
8
1

We are showing hereunder another apportionment of the loss which includes the Travellers Multi-Indemnity policy for reference purposes.

Pol C R I P
icy o i n a
No. m s j y
p k u s
a r
n e
y s

MI Z      
RO e
/ n
it
h

F- I      
02 n
50 s
0 u
r
a
n
c
e

  C B P P
o u 5 1
r i 0 1
p l , ,
11

. d 0 8
i 0 7
n 0 7
g .
1
4

F- P      
84 h
59 il
0 .

  B      
ri
ti
s
h

  A I 7 1
s - 0 6
s B , ,
c u 0 6
o i 0 2
. l 0 8
C d .
o i 0
. n 0
g

      II  
-
B
u
il
d
i
n
g

    F 5 2
F 0 4
F , ,
0 9
& 0 1
0 8
.
P 7
E 9
12

PV S A    
C- S c
15 S c
18 r
1 e
d
i
t
e
d

  G      
r
o
u
p
o
f

  I B 2 5
n u 5 ,
s i , 9
u l 0 3
r d 0 8
e i 0 .
r n 5
s g 0

F- I I 3 1
59 n - 0 4
9 s R , ,
DV u e 0 4
r f 0 6
e 0 7
r .
s 3
1

  M I 7 1
u I 0 6
lt - , ,
i B 0 6
u 0 2
i 0 8
l .
d 0
i 0
n
13
    T P
o 2
t 9
a 5
l .
s 0
0 7
0 .
Based on the computation of the loss, including the Travellers
Multi- Indemnity, respondents, Zenith Insurance, Phil. British
Assurance and S.S.S. Accredited Group of Insurers, paid their
corresponding shares of the loss. Complainants were paid the
following: P41,546.79 by Philippine British Assurance Co.,
P11,877.14 by Zenith Insurance Corporation, and P5,936.57
by S.S.S. Group of Accredited Insurers (Par. 6. Amended
Complaint). Demand was made from respondent Travellers
Multi-Indemnity for its share in the loss but the same was
refused. Hence, complainants demanded from the other three
(3) respondents the balance of each share in the loss based on
the computation of the Adjustment Standards Report excluding
Travellers Multi-Indemnity in the amount of P30,894.31
(P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and
P2,866.90, SSS Accredited) but the same was refused, hence,
this action.
In their answers, Philippine British Assurance and Zenith
Insurance Corporation admitted the material allegations in the
complaint, but denied liability on the ground that the claim of
the complainants had already been waived, extinguished or
paid. Both companies set up counterclaim in the total amount
of P 91,546.79.
Instead of filing an answer, SSS Accredited Group of Insurers
informed the Commission in its letter of July 22, 1977 that the
herein claim of complainants for the balance had been paid in
the amount of P 5,938.57 in full, based on the Adjustment
Standards Corporation Report of September 22, 1975.
Travellers Insurance, on its part, admitted the issuance of the
Policy No. 599 DV and alleged as its special and affirmative
defenses the following, to wit: that Fire Policy No. 599 DV,
covering the furniture and building of complainants was
P
9
0
,
2
5
8
1
secured by a certain Arsenio Chua, mortgage creditor, for the
purpose of protecting his mortgage credit against the
complainants; that the said policy was issued in the name of
Azucena Palomo, only to indicate that she owns the insured
premises; that the policy contains an endorsement in favor of
Arsenio Chua as his mortgage interest may appear to indicate
that insured was Arsenio Chua and the complainants; that the
premium due on said fire policy was paid by Arsenio Chua; that
respondent Travellers is not liable to pay complainants.
On May 31, 1977, Tai Tong Chuache & Co. filed a complaint in
intervention claiming the proceeds of the fire Insurance Policy
No. F-559 DV, issued by respondent Travellers Multi-
Indemnity.
Travellers Insurance, in answer to the complaint in
intervention, alleged that the Intervenor is not entitled to
indemnity under its Fire Insurance Policy for lack of insurable
interest before the loss of the insured premises and that the
complainants, spouses Pedro and Azucena Palomo, had
already paid in full their mortgage indebtedness to the
intervenor. 3
As adverted to above respondent Insurance Commission dismissed spouses
Palomos' complaint on the ground that the insurance policy subject of the
complaint was taken out by Tai Tong Chuache & Company, petitioner herein, for
its own interest only as mortgagee of the insured property and thus complainant
as mortgagors of the insured property have no right of action against herein
respondent. It likewise dismissed petitioner's complaint in intervention in the
following words:
We move on the issue of liability of respondent Travellers
Multi-Indemnity to the Intervenor-mortgagee. The complainant
14
testified that she was still indebted to Intervenor in the amount
of P100,000.00. Such allegation has not however, been
sufficiently proven by documentary evidence. The certification
(Exhibit 'E-e') issued by the Court of First Instance of Davao,
Branch 11, indicate that the complainant was Antonio Lopez
Chua and not Tai Tong Chuache & Company. 4
From the above decision, only intervenor Tai Tong Chuache filed a motion for
reconsideration but it was likewise denied hence, the present petition.
It is the contention of the petitioner that respondent Insurance Commission
decided an issue not raised in the pleadings of the parties in that it ruled that a
certain Arsenio Lopez Chua is the one entitled to the insurance proceeds and not
Tai Tong Chuache & Company.
This Court cannot fault petitioner for the above erroneous interpretation of the
decision appealed from considering the manner it was written. 5 As correctly
pointed out by respondent insurance commission in their comment, the decision
did not pronounce that it was Arsenio Lopez Chua who has insurable interest
over the insured property. Perusal of the decision reveals however that it readily
absolved respondent insurance company from liability on the basis of the
commissioner's conclusion that at the time of the occurrence of the peril insured
against petitioner as mortgagee had no more insurable interest over the insured
property. It was based on the inference that the credit secured by the mortgaged
property was already paid by the Palomos before the said property was gutted
down by fire. The foregoing conclusion was arrived at on the basis of the
certification issued by the then Court of First Instance of Davao, Branch II that in
a certain civil action against the Palomos, Antonio Lopez Chua stands as the
complainant and not petitioner Tai Tong Chuache & Company.
We find the petition to be impressed with merit. It is a well known postulate that
the case of a party is constituted by his own affirmative allegations. Under
Section 1, Rule 1316 each party must prove his own affirmative allegations by the
amount of evidence required by law which in civil cases as in the present case is
preponderance of evidence. The party, whether plaintiff or defendant, who
asserts the affirmative of the issue has the burden of presenting at the trial such
amount of evidence as required by law to obtain favorable judgment.7 Thus,
petitioner who is claiming a right over the insurance must prove its case.
Likewise, respondent insurance company to avoid liability under the policy by
setting up an affirmative defense of lack of insurable interest on the part of the
petitioner must prove its own affirmative allegations.
It will be recalled that respondent insurance company did not assail the validity of
the insurance policy taken out by petitioner over the mortgaged property. Neither
did it deny that the said property was totally razed by fire within the period
covered by the insurance. Respondent, as mentioned earlier advanced an
affirmative defense of lack of insurable interest on the part of the petitioner that
before the occurrence of the peril insured against the Palomos had already paid
their credit due the petitioner. Respondent having admitted the material
allegations in the complaint, has the burden of proof to show that petitioner has
no insurable interest over the insured property at the time the contingency took
place. Upon that point, there is a failure of proof. Respondent, it will be noted,
exerted no effort to present any evidence to substantiate its claim, while
petitioner did. For said respondent's failure, the decision must be adverse to it.
However, as adverted to earlier, respondent Insurance Commission absolved
respondent insurance company from liability on the basis of the certification
issued by the then Court of First Instance of Davao, Branch II, that in a certain
civil action against the Palomos, Arsenio Lopez Chua stands as the complainant
and not Tai Tong Chuache. From said evidence respondent commission inferred
that the credit extended by herein petitioner to the Palomos secured by the
insured property must have been paid. Such is a glaring error which this Court
cannot sanction. Respondent Commission's findings are based upon a mere
inference.
The record of the case shows that the petitioner to support its claim for the
insurance proceeds offered as evidence the contract of mortgage (Exh. 1) which
has not been cancelled nor released. It has been held in a long line of cases that
when the creditor is in possession of the document of credit, he need not prove
non-payment for it is presumed. 8 The validity of the insurance policy taken b
petitioner was not assailed by private respondent. Moreover, petitioner's claim
that the loan extended to the Palomos has not yet been paid was corroborated
by Azucena Palomo who testified that they are still indebted to herein petitioner. 9
Public respondent argues however, that if the civil case really stemmed from the
loan granted to Azucena Palomo by petitioner the same should have been
brought by Tai Tong Chuache or by its representative in its own behalf. From the
above premise respondent concluded that the obligation secured by the insured
property must have been paid.
The premise is correct but the conclusion is wrong. Citing Rule 3, Sec.
2 10 respondent pointed out that the action must be brought in the name of the
real party in interest. We agree. However, it should be borne in mind that
petitioner being a partnership may sue and be sued in its name or by its duly
authorized representative. The fact that Arsenio Lopez Chua is the
representative of petitioner is not questioned. Petitioner's declaration that Arsenio
Lopez Chua acts as the managing partner of the partnership was corroborated
by respondent insurance company. 11 Thus Chua as the managing partner of the
partnership may execute all acts of administration 12 including the right to sue
debtors of the partnership in case of their failure to pay their obligations when it
became due and demandable. Or at the very least, Chua being a partner of
petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an
agent, it is understood that he acted for and in behalf of the firm.13 Public
respondent's allegation that the civil case flied by Arsenio Chua was in his
capacity as personal creditor of spouses Palomo has no basis.
15

The respondent insurance company having issued a policy in favor of herein Multi-Indemnity Corporation to pay petitioner the face value of Insurance Policy
petitioner which policy was of legal force and effect at the time of the fire, it is No. 599-DV in the amount of P100,000.00. Costs against said private
bound by its terms and conditions. Upon its failure to prove the allegation of lack respondent.
of insurable interest on the part of the petitioner, respondent insurance company
is and must be held liable. SO ORDERED.

IN VIEW OF THE FOREGOING, the decision appealed from is hereby SET Teehankee, C.J., Narvasa, Cruz and Griño-Aquino, JJ., concur.
ASIDE and ANOTHER judgment is rendered order private respondent Travellers

 
16
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16318             October 21, 1921
PANG LIM and BENITO GALVEZ, plaintiffs-appellees,  Internal Revenue, to rearrange, alter and clean up the
vs.
LO SENG, defendant-appellant.
Cohn, Fisher and DeWitt for appellant.  they may introduce, such as machinery, apparatus,
No appearance for appellees.
STREET, J.:
For several years prior to June 1, 1916, two of the litigating parties herein,
namely, Lo Seng and Pang Lim, Chinese residents of the City of Manila, were
partners, under the firm name of Lo Seng and Co., in the business of running a
distillery, known as "El Progreso," in the Municipality of Paombong, in the
Province of Bulacan. The land on which said distillery is located as well as the
buildings and improvements originally used in the business were, at the time to
which reference is now made, the property of another Chinaman, who resides in
Hongkong, named Lo Yao, who, in September, 1911, leased the same to the firm
of Lo Seng and Co. for the term of three years.
Upon the expiration of this lease a new written contract, in the making of which
Lo Yao was represented by one Lo Shui as attorney in fact, became effective
whereby the lease was extended for fifteen years. The reason why the contract
was made for so long a period of time appears to have been that the Bureau of
Internal Revenue had required sundry expensive improvements to be made in
the distillery, and it was agreed that these improvements should be effected at
the expense of the lessees. In conformity with this understanding many
thousands of pesos were expended by Lo Seng and Co., and later by Lo Seng
alone, in enlarging and improving the plant.
Among the provisions contained in said lease we note the following:
Know all men by these presents:
xxx     xxx     xxx
1. That I, Lo Shui, as attorney in fact in charge of the
properties of Mr. Lo Yao of Hongkong, cede by way of
lease for fifteen years more said distillery "El
Progreso" to Messrs. Pang Lim and Lo Seng (doing
business under the firm name of Lo Seng and Co.),
after the termination of the previous contract, because
of the fact that they are required, by the Bureau of
distillery.
2. That all the improvements and betterments which
tanks, pumps, boilers and buildings which the
business may require, shall be, after the termination
of the fifteen years of lease, for the benefit of Mr. Lo
Yao, my principal, the buildings being considered as
improvements.
3. That the monthly rent of said distillery is P200, as
agreed upon in the previous contract of September
11, 1911, acknowledged before the notary public D.
Vicente Santos; and all modifications and repairs
which may be needed shall be paid for by Messrs.
Pang Lim and Lo Seng.
We, Pang Lim and Lo Seng, as partners in said distillery "El
Progreso," which we are at present conducting, hereby accept
this contract in each and all its parts, said contract to be
effective upon the termination of the contract of September 11,
1911.
Neither the original contract of lease nor the agreement extending the same was
inscribed in the property registry, for the reason that the estate which is the
subject of the lease has never at any time been so inscribed.
On June 1, 1916, Pang Lim sold all his interest in the distillery to his partner Lo
Seng, thus placing the latter in the position of sole owner; and on June 28, 1918,
Lo Shui, again acting as attorney in fact of Lo Yao, executed and acknowledged
before a notary public a deed purporting to convey to Pang Lim and another
Chinaman named Benito Galvez, the entire distillery plant including the land used
in connection therewith. As in case of the lease this document also was never
recorded in the registry of property. Thereafter Pang Lim and Benito Galvez
demanded possession from Lo Seng, but the latter refused to yield; and the
present action of unlawful detainer was thereupon initiated by Pang Lim and
17
Benito Galvez in the court of the justice of the peace of Paombong to recover
possession of the premises. From the decision of the justice of the peace the
case was appealed to the Court of First Instance, where judgment was rendered
for the plaintiffs; and the defendant thereupon appealed to the Supreme Court.
The case for the plaintiffs is rested exclusively on the provisions of article 1571 of
the Civil Code, which reads in part as follows:
ART. 1571. The purchaser of a leased estate shall be entitled to
terminate any lease in force at the time of making the sale, unless the
contrary is stipulated, and subject to the provisions of the Mortgage
Law.
In considering this provision it may be premised that a contract of lease is
personally binding on all who participate in it regardless of whether it is recorded
or not, though of course the unrecorded lease creates no real charge upon the
land to which it relates. The Mortgage Law was devised for the protection of third
parties, or those who have not participated in the contracts which are by that law
required to be registered; and none of its provisions with reference to leases
interpose any obstacle whatever to the giving of full effect to the personal
obligations incident to such contracts, so far as concerns the immediate parties
thereto. This is rudimentary, and the law appears to be so understood by all
commentators, there being, so far as we are aware, no authority suggesting the
contrary. Thus, in the commentaries of the authors Galindo and Escosura, on the
Mortgage Law, we find the following pertinent observation: "The Mortgage Law is
enacted in aid of and in respect to third persons only; it does not affect the
relations between the contracting parties, nor their capacity to contract. Any
question affecting the former will be determined by the dispositions of the special
law [i.e., the Mortgage Law], while any question affecting the latter will be
determined by the general law." (Galindo y Escosura, Comentarios a la
Legislacion Hipotecaria, vol. I, p. 461.)
Although it is thus manifest that, under the Mortgage Law, as regards the
personal obligations expressed therein, the lease in question was from the
beginning, and has remained, binding upon all the parties thereto — among
whom is to be numbered Pang Lim, then a member of the firm of Lo Seng and
Co. — this does not really solve the problem now before us, which is, whether
the plaintiffs herein, as purchasers of the estate, are at liberty to terminate the
lease, assuming that it was originally binding upon all parties participating in it.
Upon this point the plaintiffs are undoubtedly supported, prima facie, by the letter
of article 1571 of the Civil Code; and the position of the defendant derives no
assistance from the mere circumstance that the lease was admittedly binding as
between the parties thereto. 1awph!l.net
The words "subject to the provisions of the Mortgage Law," contained in article
1571, express a qualification which evidently has reference to the familiar
proposition that recorded instruments are effective against third persons from the
date of registration (Co-Tiongco vs. Co-Guia, 1 Phil., 210); from whence it follows
that a recorded lease must be respected by any purchaser of the estate
whomsoever. But there is nothing in the Mortgage Law which, so far as we now
see, would prevent a purchaser from exercising the precise power conferred in
article 1571 of the Civil Code, namely, of terminating any lease which is
unrecorded; nothing in that law that can be considered as arresting the force of
article 1571 as applied to the lease now before us.
Article 1549 of the Civil Code has also been cited by the attorneys for the
appellant as supplying authority for the proposition that the lease in question
cannot be terminated by one who, like Pang Lim, has taken part in the contract.
That provision is practically identical in terms with the first paragraph of article 23
of the Mortgage Law, being to the effect that unrecorded leases shall be of no
effect as against third persons; and the same observation will suffice to dispose
of it that was made by us above in discussing the Mortgage Law, namely, that
while it recognizes the fact that an unrecorded lease is binding on all persons
who participate therein, this does not determine the question whether, admitting
the lease to be so binding, it can be terminated by the plaintiffs under article
1571.
Having thus disposed of the considerations which arise in relation with the
Mortgage Law, as well as article 1549 of the Civil Coded — all of which, as we
have seen, are undecisive — we are brought to consider the aspect of the case
which seems to us conclusive. This is found in the circumstance that the plaintiff
Pang Lim has occupied a double role in the transactions which gave rise to this
litigation, namely, first, as one of the lessees; and secondly, as one of the
purchasers now seeking to terminate the lease. These two positions are
essentially antagonistic and incompatible. Every competent person is by law
bond to maintain in all good faith the integrity of his own obligations; and no less
certainly is he bound to respect the rights of any person whom he has placed in
his own shoes as regards any contract previously entered into by himself.
While yet a partner in the firm of Lo Seng and Co., Pang Lim participated in the
creation of this lease, and when he sold out his interest in that firm to Lo Seng
this operated as a transfer to Lo Seng of Pang Lim's interest in the firm assets,
including the lease; and Pang Lim cannot now be permitted, in the guise of a
purchaser of the estate, to destroy an interest derived from himself, and for which
he has received full value.
The bad faith of the plaintiffs in seeking to deprive the defendant of this lease is
strikingly revealed in the circumstance that prior to the acquisition of this property
Pang Lim had been partner with Lo Seng and Benito Galvez an employee. Both
therefore had been in relations of confidence with Lo Seng and in that position
18
had acquired knowledge of the possibilities of the property and possibly an
experience which would have enabled them, in case they had acquired
possession, to exploit the distillery with profit. On account of his status as partner
in the firm of Lo Seng and Co., Pang Lim knew that the original lease had been
extended for fifteen years; and he knew the extent of valuable improvements that
had been made thereon. Certainly, as observed in the appellant's brief, it would
be shocking to the moral sense if the condition of the law were found to be such
that Pang Lim, after profiting by the sale of his interest in a business, worthless
without the lease, could intervene as purchaser of the property and confiscate for
his own benefit the property which he had sold for a valuable consideration to Lo
Seng. The sense of justice recoils before the mere possibility of such eventuality.
Above all other persons in business relations, partners are required to exhibit
towards each other the highest degree of good faith. In fact the relation between
partners is essentially fiduciary, each being considered in law, as he is in fact, the
confidential agent of the other. It is therefore accepted as fundamental in equity
jurisprudence that one partner cannot, to the detriment of another, apply
exclusively to his own benefit the results of the knowledge and information
gained in the character of partner. Thus, it has been held that if one partner
obtains in his own name and for his own benefit the renewal of a lease on
property used by the firm, to commence at a date subsequent to the expiration of
the firm's lease, the partner obtaining the renewal is held to be a constructive
trustee of the firm as to such lease. (20 R. C. L., 878-882.) And this rule has even
been applied to a renewal taken in the name of one partner after the dissolution
of the firm and pending its liquidation. (16 R. C. L., 906; Knapp vs. Reed, 88
Neb., 754; 32 L. R. A. [N. S.], 869; Mitchell vs. Reed 61 N. Y., 123; 19 Am. Rep.,
252.)
An additional consideration showing that the position of the plaintiff Pang Lim in
this case is untenable is deducible from articles 1461 and 1474 of the Civil Code,
which declare that every person who sells anything is bound to deliver and
warrant the subject-matter of the sale and is responsible to the vendee for the
legal and lawful possession of the thing sold. The pertinence of these provisions
to the case now under consideration is undeniable, for among the assets of the
partnership which Pang Lim transferred to Lo Seng, upon selling out his interest
in the firm to the latter, was this very lease; and while it cannot be supposed that
the obligation to warrant recognized in the articles cited would nullify article 1571,
if the latter article had actually conferred on the plaintiffs the right to terminate
this lease, nevertheless said articles (1461, 1474), in relation with other
considerations, reveal the basis of an estoppel which in our opinion precludes
Pang Lim from setting up his interest as purchaser of the estate to the detriment
of Lo Seng.
It will not escape observation that the doctrine thus applied is analogous to the
doctrine recognized in courts of common law under the head of estoppel by
deed, in accordance with which it is held that if a person, having no title to land,
conveys the same to another by some one or another of the recognized modes
of conveyance at common law, any title afterwards acquired by the vendor will
pass to the purchaser; and the vendor is estopped as against such purchaser
from asserting such after-acquired title. The indenture of lease, it may be further
noted, was recognized as one of the modes of conveyance at common law which
created this estoppel. (8 R. C. L., 1058, 1059.)
From what has been said it is clear that Pang Lim, having been a participant in
the contract of lease now in question, is not in a position to terminate it: and this
is a fatal obstacle to the maintenance of the action of unlawful detainer by him.
Moreover, it is fatal to the maintenance of the action brought jointly by Pang Lim
and Benito Galvez. The reason is that in the action of unlawful detainer, under
section 80 of the Code of Civil Procedure, the only question that can be
adjudicated is the right to possession; and in order to maintain the action, in the
form in which it is here presented, the proof must show that occupant's
possession is unlawful, i. e.,  that he is unlawfully withholding possession after
the determination of the right to hold possession. In the case before us quite the
contrary appears; for, even admitting that Pang Lim and Benito Galvez have
purchased the estate from Lo Yao, the original landlord, they are, as between
themselves, in the position of tenants in common or owners  pro indiviso,
according to the proportion of their respective contribution to the purchase price.
But it is well recognized that one tenant in common cannot maintain a
possessory action against his cotenant, since one is as much entitled to have
possession as the other. The remedy is ordinarily by an action for partition.
(Cornista vs. Ticson, 27 Phil., 80.) It follows that as Lo Seng is vested with the
possessory right as against Pang Lim, he cannot be ousted either by Pang Lim
or Benito Galvez. Having lawful possession as against one cotenant, he is
entitled to retain it against both. Furthermore, it is obvious that partition
proceedings could not be maintained at the instance of Benito Galvez as against
Lo Seng, since partition can only be effected where the partitioners are
cotenants, that is, have an interest of an identical character as among
themselves. (30 Cyc., 178-180.) The practical result is that both Pang Lim and
Benito Galvez are bound to respect Lo Seng's lease, at least in so far as the
present action is concerned.
We have assumed in the course of the preceding discussion that the deed of
sale under which the plaintiffs acquired the right of Lo Yao, the owner of the fee,
is competent proof in behalf of the plaintiffs. It is, however, earnestly insisted by
the attorney for Lo Seng that this document, having never been recorded in the
property registry, cannot under article 389 of the Mortgage Law, be used in court
against him because as to said instrument he is a third party. The important
question thus raised is not absolutely necessary to the decision of this case, and
we are inclined to pass it without decision, not only because the question does
not seem to have been ventilated in the Court of First Instance but for the further
reason that we have not had the benefit of any written brief in this case in behalf
of the appellees.
The judgment appealed from will be reversed, and the defendant will be absolved
from the complaint. It is so ordered, without express adjudication as to costs.
19

Johnson, Araullo, Avanceña and Villamor, JJ., concur. defendant-appellant Josefina Realubit and Francis Eric
Amaury Biondo and the subsequent conduct of accounting,
liquidation of assets and division of shares of the joint venture
The Lawphil Project - Arellano Law Foundation business.
 
SECOND DIVISION Let a copy hereof and the records of the case be remanded to
  the trial court for appropriate proceedings.[4]
   
JOSEFINA P. REALUBIT,   G.R. No. 178782  
Petitioner,  
    The Facts
   
  Present:  
   
- versus - VELASCO, JR.,* J.,
  BRION,** On 17 March 1994, petitioner Josefina Realubit (Josefina) entered into a Joint
  Acting Chairperson, Venture Agreement with Francis Eric Amaury Biondo (Biondo), a French
  ABAD,*** national, for the operation of an ice manufacturing business. With Josefina as the
  PEREZ, and industrial partner and Biondo as the capitalist partner, the parties agreed that
  SERENO, JJ. they would each receive 40% of the net profit, with the remaining 20% to be used
    for the payment of the ice making machine which was purchased for the
    business.[5] For and in consideration of the sum of P500,000.00, however, Biondo
    subsequently executed a Deed of Assignment dated 27 June 1997, transferring
    all his rights and interests in the business in favor of respondent Eden Jaso
PROSENCIO D. JASO and EDENG. Promulgated: (Eden), the wife of respondent Prosencio Jaso.[6] With Biondos eventual
JASO,   departure from the country, the Spouses Jaso caused their lawyer to send
Respondents. September 21, 2011 Josefina a letter dated 19 February 1998, apprising her of their acquisition of said
      Frenchmans share in the business and formally demanding an accounting and
x---------------------------------------------------------- inventory thereof as well as the remittance of their portion of its profits.[7]
- -x
   
 
DECISION
Faulting Josefina with unjustified failure to heed their demand, the
 
Spouses Jaso commenced the instant suit with the filing of their 3 August 1998
 
Complaint against Josefina, her husband, Ike Realubit (Ike), and their alleged
PEREZ, J.:
dummies, for specific performance, accounting, examination, audit and inventory
 
of assets and properties, dissolution of the joint venture, appointment of a
receiver and damages. Docketed as Civil Case No. 98-0331 before respondent
The validity as well as the consequences of an assignment of rights in a Branch 257 of the Regional Trial Court (RTC) of Paraaque City, said complaint
joint venture are at issue in this petition for review filed pursuant to Rule 45 of alleged, among other matters, that the Spouses Realubit had no gainful
the 1997 Rules of Civil Procedure,[1] assailing the 30 April 2007 occupation or business prior to their joint venture with Biondo; that with the
Decision[2] rendered by the Court of Appeals (CA) then Twelfth Division in CA- income of the business which earned not less than P3,000.00 per day, they
G.R. CV No. 73861,[3] the dispositive portion of which states: were, however, able to acquire the two-storey building as well as the land on
which the joint ventures ice plant stands, another building which they used as
  their office and/or residence and six (6) delivery vans; and, that aside from
appropriating for themselves the income of the business, the Spouses Realubit
have fraudulently concealed the funds and assets thereof thru their relatives,
WHEREFORE, the Decision appealed from is SET ASIDE and associates or dummies.[8]
we order the dissolution of the joint venture between
20

  claimed by the Spouses Realubit; (b) absent showing of Josefinas knowledge

and consent to the transfer of Biondos share, Eden cannot be considered as a
Served with summons, the Spouses Realubit filed their Answer dated partner in the business, pursuant to Article 1813 of the Civil Code of the
21 October 1998, specifically denying the material allegations of the foregoing Philippines; (c) while entitled to Biondos share in the profits of the business,
complaint. Claiming that they have been engaged in the tube ice trading Eden cannot, however, interfere with the management of the partnership, require
business under a single proprietorship even before their dealings with Biondo, information or account of its transactions and inspect its books; (d) the
the Spouses Realubit, in turn, averred that their said business partner had left the partnership should first be dissolved before Eden can seek an accounting of its
country in May 1997 and could not have executed the Deed of Assignment which transactions and demand Biondos share in the business; and, (e) the evidence
bears a signature markedly different from that which he affixed on their Joint adduced before the RTC do not support the award of moral damages in favor of
Venture Agreement; that they refused the Spouses Jasos demand in view of the the Spouses Jaso.[12]
dubious circumstances surrounding their acquisition of Biondos share in the
business which was established at Don Antonio Heights, Commonwealth  
Avenue, Quezon City; that said business had already stopped operations on 13
January 1996 when its plant shut down after its power supply was disconnected The Spouses Realubits motion for reconsideration of the foregoing
by MERALCO for non-payment of utility bills; and, that it was their own tube ice decision was denied for lack of merit in the CAs 28 June 2007 Resolution,
trading business which had been moved to 66-C Cenacle Drive, Sanville [13]
 hence, this petition.
Subdivision, Project 6, Quezon City that the Spouses Jaso mistook for the ice
manufacturing business established in partnership with Biondo.[9]
The Issues
 
 
The issues thus joined and the mandatory pre-trial conference
subsequently terminated, the RTC went on to try the case on its merits and, The Spouses Realubit urge the reversal of the assailed decision upon
thereafter, to render its Decision dated 17 September 2001, discounting the the negative of the following issues, to wit:
existence of sufficient evidence from which the income, assets and the supposed
dissolution of the joint venture can be adequately reckoned. Upon the finding,  
however, that the Spouses Jaso had been nevertheless subrogated to Biondos
rights in the business in view of their valid acquisition of the latters share as A.               WHETHER OR NOT THERE WAS A
capitalist partner,[10] the RTC disposed of the case in the following wise: VALID ASSIGNMENT OF RIGHTS TO THE JOINT
VENTURE.
   
B. WHETHER THE COURT MAY ORDER PETITIONER
WHEREFORE, defendants are ordered to submit to plaintiffs a [JOSEFINA REALUBIT] AS PARTNER IN THE
complete accounting and inventory of the assets and liabilities JOINT VENTURE TO RENDER [A]N ACCOUNTING
of the joint venture from its inception to the present, to allow TO ONE WHO IS NOT A PARTNER IN SAID JOINT
plaintiffs access to the books and accounting records of the VENTURE.
joint venture, to deliver to plaintiffs their share in the profits, if  
any, and to pay the plaintiffs the amount of P20,000. for moral C. WHETHER PRIVATE RESPONDENTS [SPOUSES JASO]
damages. The claims for exemplary damages and attorneys HAVE ANY RIGHT IN THE JOINT VENTURE AND
fees are denied for lack of basis.[11] IN THE SEPARATE ICE BUSINESS OF
  PETITIONER[S].[14]

On appeal before the CA, the foregoing decision was set aside in the  
herein assailed Decision dated 30 April 2007, upon the following findings and
conclusions: (a) the Spouses Jaso validly acquired Biondos share in the The Courts Ruling
business which had been transferred to and continued its operations at 66-C
Cenacle Drive, Sanville Subdivision, Project 6, Quezon City and not dissolved as  
21
We find the petition bereft of merit.
 
The Spouses Realubit argue that, in upholding its validity, both the RTC
and the CA inordinately gave premium to the notarization of the 27 June
1997 Deed of Assignmentexecuted by Biondo in favor of the Spouses
Jaso. Calling attention to the latters failure to present before the RTC said
assignor or, at the very least, the witnesses to said document, the Spouses
Realubit maintain that the testimony of Rolando Diaz, the Notary Public before
whom the same was acknowledged, did not suffice to establish its authenticity
and/or validity. They insist that notarization did not automatically and conclusively
confer validity on said deed, since it is still entirely possible that Biondo did not
execute said deed or, for that matter, appear before said notary public.[15] The
dearth of merit in the Spouses Realubits position is, however, immediately
evident from the settled rule that documents acknowledged before notaries public
are public documents which are admissible in evidence without necessity of
preliminary proof as to their authenticity and due execution.[16]
 
It cannot be gainsaid that, as a public document, the Deed of
Assignment Biondo executed in favor of Eden not only enjoys a presumption of
regularity[17] but is also considered prima facie evidence of the facts therein
stated.[18] A party assailing the authenticity and due execution of a notarized
document is, consequently, required to present evidence that is clear, convincing
and more than merely preponderant.[19] In view of the Spouses Realubits failure
to discharge this onus, we find that both the RTC and the CA correctly upheld the
authenticity and validity of said Deed of Assignment upon the combined strength
of the above-discussed disputable presumptions and the testimonies elicited
from Eden[20] and Notary Public Rolando Diaz.[21] As for the Spouses Realubits
bare assertion that Biondos signature on the same document appears to be
forged, suffice it to say that, like fraud, [22] forgery is never presumed and must
likewise be proved by clear and convincing evidence by the party alleging the
same.[23] Aside from not being borne out by a comparison of Biondos signatures
on the Joint Venture Agreement[24] and the Deed of Assignment,[25] said forgery
is, moreover debunked by Biondos duly authenticated certification dated 17
November 1998, confirming the transfer of his interest in the business in favor of
Eden.[26]
Generally understood to mean an organization formed for some
temporary purpose, a joint venture is likened to a particular partnership or one
which has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation.[27] The rule is settled that
joint ventures are governed by the law on partnerships [28] which are, in turn,
based on mutual agency or delectus personae.[29]  Insofar as a partners
conveyance of the entirety of his interest in the partnership is concerned, Article
1813 of the Civil Code provides as follows:
 
Art. 1813. A conveyance by a partner of his whole interest in
the partnership does not itself dissolve the partnership, or, as
against the other partners in the absence of agreement, entitle
the assignee, during the continuance of the partnership, to
interfere in the management or administration of the
partnership business or affairs, or to require any information or
account of partnership transactions, or to inspect the
partnership books; but it merely entitles the assignee to receive
in accordance with his contracts the profits to which the
assigning partners would otherwise be entitled. However, in
case of fraud in the management of the partnership, the
assignee may avail himself of the usual remedies.
 
In the case of a dissolution of the partnership, the assignee is
entitled to receive his assignors interest and may require an
account from the date only of the last account agreed to by all
the partners.
 
From the foregoing provision, it is evident that (t)he transfer by a partner
of his partnership interest does not make the assignee of such interest a partner
of the firm, nor entitle the assignee to interfere in the management of the
partnership business or to receive anything except the assignees profits. The
assignment does not purport to transfer an interest in the partnership, but only a
future contingent right to a portion of the ultimate residue as the assignor may
become entitled to receive by virtue of his proportionate interest in the capital.
[30]
 Since a partners interest in the partnership includes his share in the profits,
[31]
 we find that the CA committed no reversible error in ruling that the Spouses
Jaso are entitled to Biondos share in the profits, despite Juanitas lack of consent
to the assignment of said Frenchmans interest in the joint
venture. Although Eden did not, moreover, become a partner as a consequence
of the assignment and/or acquire the right to require an accounting of the
partnership business, the CA correctly granted her prayer for dissolution of the
joint venture conformably with the right granted to the purchaser of a partners
interest under Article 1831 of the Civil Code.[32]
Considering that they involve questions of fact, neither are we inclined
to hospitably entertain the Spouses Realubits insistence on the supposed fact
that Josefinas joint venture with Biondo had already been dissolved and that the
22

ice manufacturing business at 66-C Cenacle Drive, Sanville Subdivision, Project

6, Quezon City was merely a continuation of the same business they previously
operated under a single proprietorship. It is well-entrenched doctrine that
questions of fact are not proper subjects of appeal by certiorari under Rule 45 of
the Rules of Court as this mode of appeal is confined to questions of law. [33] Upon
the principle that this Court is not a trier of facts, we are not duty bound to
examine the evidence introduced by the parties below to determine if the trial and
the appellate courts correctly assessed and evaluated the evidence on record.
[34]
Absent showing that the factual findings complained of are devoid of support
by the evidence on record or the assailed judgment is based on misapprehension
of facts, the Court will limit itself to reviewing only errors of law.[35]

Based on the evidence on record, moreover, both the RTC[36] and the

CA[37] ruled out the dissolution of the joint venture and concluded that the ice
manufacturing business at the aforesaid address was the same one established
by Juanita and Biondo. As a rule, findings of fact of the CA are binding and
conclusive upon this Court,[38] and will not be reviewed or disturbed on
appeal[39] unless the case falls under any of the following recognized exceptions:
(1) when the conclusion is a finding grounded entirely on speculation, surmises
and conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) where there is a grave abuse of discretion; (4) when the judgment
is based on a misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when the CA, in making its findings, went beyond the issues of the
case and the same is contrary to the admissions of both appellant and appellee;
(7) when the findings are contrary to those of the trial court; (8) when the findings
of fact are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioners'
main and reply briefs are not disputed by the respondents; and, (10) when the
findings of fact of the CA are premised on the supposed absence of evidence
and contradicted by the evidence on record.[40] Unfortunately for the Spouses
Realubits cause, not one of the foregoing exceptions applies to the case.

WHEREFORE, the petition is DENIED for lack of merit and the assailed

CA Decision dated 30 April 2007 is, accordingly, AFFIRMED in toto.

 
 
SO ORDERED.